Mahindra Lifespace Developers – Volumes Pickup But Realisation Declines For March 2014 Quarter

The Indian real estate companies have been witnessing a dull a tepid period since last two years. And it is no wonder that the impact of the same is being seen in the quarterly results of the realty companies. Consistently falling sales volumes and higher debt burdens only added to the pressure.

Amid all these circumstances Mahindra Lifespace announced its Mach 2014 quarter and yearly financial results. Here the pressure could be clearly seen with the company’s topline and bottomline declining for FY14 as compared to FY13. To put the figures in perspective, the topline of the company for FY14 stood at Rs 756 Crore as against Rs 772 crore in FY13. As for the bottomline the Profit after tax (PAT) for FY14 stood at Rs 101 crore as against Rs 141 crore in FY13.

If we take look into the operational details of the company, in the residential segment the company has achieved revenue recognition for the five phases of four projects. A total of 200 units were sold across 8 projects for a total value of Rs 98 Crore. Though the number of units sold has increased significantly from 113 units in December 2013 to 200 units in March 2014, the realisation per unit has actually declined significantly. On the percentage terms the realisation has declined by more than 23%. As for the future projects it added a development potential of 4.8 lakh sq ft. As for the integrated business cities it acquired a new customer at MWC Jaipur.

If we take a look at the performance on the quarterly basis, the performance has witnessed marginal improvement on the sequential basis. The topline increased to Rs 189.38 crore as against Rs 143.60 crore. However the bottomline remained stagnant for the March 2014 quarter at Rs 30.30 Crore as against Rs 29.18 Crore in December 2013. However the cash flow is still a problem for the company.

The long term and short term liabilities have increased significantly over the year. Just to quantify the long term borrowings increased to Rs 1197.21 crore in March 2014 from the levels of Rs 574.92 Crore in FY13. However the short term borrowing witnessed some decline to Rs 50.55 crore form the levels of Rs 203.26 crore.

As far as the results are concerned the quarterly results are not important for the realty companies. However, declining sales and increased debt burden is worrisome. We are of the opinion that, unless and until the companies witness growth in sales volume and generate cash flows, the situation will not improve.

Hence we recommend the readers to stay away from the realty companies as a whole at least for one quarter. As the situation improves after the election results, one can look for some credible companies.